Dean Foods Davis Tells Insider Jury of Prostitutes, Gambling

Dean Foods Davis Exposes Seedy Side in Insider-Trial Testimony

(Bloomberg) -- Blackjack, patronizing prostitutes and stealing from a charity for women and children. Those were some of the vices the U.S. government’s star witness admitted to during testimony in the inside-trading trial of Las Vegas gambler Billy Walters.

Tom C. Davis, the former chairman of Dean Foods Co., also told a Manhattan jury he was enamored with Walters, who introduced him to pro golfer Phil Mickelson and was friends with investor Carl Icahn.

Even after Walters arranged a $625,000 loan in 2010 for him, Davis said his failed investments, soaring expenses and a $200,000 casino debt forced him to siphon $100,000 from a golf charity that raised money for battered women. Davis repaid the money, but said he then "double-dipped" and withdrew $50,000 from the charity’s account to gamble and pay for hookers.

“I made a very poor decision at that period of time in my life,” a chagrined Davis said in his gravelly Texas drawl.

Davis, 68, made the admissions under questioning by U.S. Assistant Attorney Brooke Cucinella. It’s standard for a witness to disclose unsavory background information up front, rather than be forced to admit to it while questioned by a defense attorney. In that case, it might appear to a jury that the witness was trying to hide something.

Walters, 70, is on trial, accused by the U.S. of reaping illegal profits over six years based on boardroom secrets Davis passed to him. Walters made $43 million, including $17.1 million on a lucrative tip about a spin-off of a Dean Foods unit in 2012, according to prosecutors.

Repaid Charity

Davis said he was authorized to draw from the charity account to pay expenses, food and gifts for the Pro-Am golf tournament he organized for the Dallas shelter. He said he repaid the charity in 2015, after having denied taking the money while being questioned under oath by officials from the U.S. Securities and Exchange Commission.

Davis said he blew the $625,000 he got through Walters, including losing $200,000 on one hand of blackjack at the Cosmopolitan of Las Vegas in 2011. Davis then sought out Walters for a second loan of $400,000, telling him it was to refinance a Dallas bank. Even though he’d stopped making payments on the first loan, Davis said Walters agreed. He said he didn’t tell Walters the real reason for the loan was "because I was embarrassed."

Asked if he had a gambling problem, Davis insisted he didn’t. He told jurors he liked to regularly bet thousands of dollars on college and NFL football games. The most he said he ever lost on sports was $20,000 on a Super Bowl game, he said.

False Pretenses

Walters’s lawyer, Barry Berke, told jurors in opening statements last week that Davis was a liar who embezzled the $400,000 on false pretenses without ever investing the funds. 

Cucinella asked Davis why he’d been giving inside information to Walters long before he got the 2010 loan.

"I’d developed a strong friendship with Mr. Walters," Davis said. "I knew who Billy Walters was -- he was a fairly famous gambler. He had a lot of connections in Las Vegas. He was a big sports gambler. I was frankly enamored with him."

Davis was also impressed with the company which Walters kept. Walters introduced him to Mickelson, who was a member of the same country club in Southern California as Walters.

Icahn Connection

Davis said Walters also passed on a stock tip to him, saying “my friend in New York likes this company a lot. You should look at it and you should think about buying the stock.”

Cucinella asked Davis who Walters’s friend was, to which Davis replied, "Carl Icahn. He told me he had a good relationship, a close relationship with Mr. Icahn. I recall him saying he actually traveled with him before."

Davis didn’t say when Walters gave him the tip or what company it pertained to.

A spokeswoman for Icahn didn’t immediately respond to a request for comment on Davis’s testimony.

Davis testified that Walters gave him a disposable phone, nicknamed the "Bat Phone," to use when passing tips about Dean Foods and said he tossed it into a creek behind his Dallas home after the FBI visited him 2014. During cross-examination Wednesday, Berke suggested Davis made up the story.

Davis had his own reasons for using a disposable phone -- because he "had a history of infidelity" and was trying to hide his frequent calls to escort services from his soon-to-be ex-wife, Terie Davis, Berke said.

Berke confronted Davis with his telephone records and his American Express bills that showed dozens of calls and charges were made to escort services, including when he was in Colorado for a Dean Foods board of directors meeting.

"Do you recall sir, that while you were on a business trip that you called an escort service?" Berke asked.

"I see that," Davis replied. "I don’t recall ever paying for sex."

The case is U.S. v. Walters, 16-cr-338, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Patricia Hurtado in Federal Court in Manhattan at

To contact the editors responsible for this story: David Glovin at, Joe Schneider, Peter Blumberg